Speculative players are taking sides on tech concerns Broadcom Corporation (NASDAQ:BRCM), QUALCOMM, Inc. (NASDAQ:QCOM) and Texas Instruments Incorporated (NASDAQ:TXN), according to data from the major options exchanges. More specifically, traders are scooping up BRCM calls, and purchasing QCOM and TXN puts at a faster-than-usual clip. Here's a closer look at recent option activity on these three stocks.
Broadcom Corporation (NASDAQ:BRCM)
During the past five days, options traders on the International Securities Exchange (ISE) have bought to open 12,743 calls on BRCM, compared to fewer than 300 puts -- resulting in a call/put volume ratio of 43.94. This ratio is among the top 20 on the exchange, underscoring the heavy call skew of late.
Broadening that to include data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) (and expanding the scope to two weeks), BRCM sports a 10-day call/put volume ratio of 6.48 -- just 11 percentage points from a 12-month high. In other words, option buyers have been scooping up BRCM calls, relative to puts, at an accelerated clip during the past couple of weeks.
Echoing that, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at 0.44, indicating that calls more than double puts among options expiring within three months. This ratio ranks higher than just 10% of comparable readings of the past year, suggesting near-term option players are more call-heavy than usual right now.
It's worth noting, though, that short interest skyrocketed 33.5% during the last two reporting periods. As such, it's possible that short sellers are hedging with long calls -- especially those of the out-of-the-money variety -- ahead of Broadcom's turn in the earnings confessional on Oct. 22.
Sentiment among analysts, meanwhile, is less ambiguous. Despite underperforming the broader S&P 500 Index (SPX) by 21 percentage points during the last three months, BRCM -- last seen at $26.66 -- boasts 20 "strong buys" and three "buy" endorsements, compared to nine lukewarm "holds" and just one "sell" or worse rating.
BRCM hasn't fared too well in the week after reporting earnings, dropping an average of 0.4% in the past six quarters. In fact, the stock shed 12.5% in the five sessions following its last turn in the earnings confessional. Another earnings miss later this month could spark a mass exodus of bulls on Wall Street, exacerbating selling pressure on the underperformer.
QUALCOMM, Inc. (NASDAQ:QCOM)
QCOM's 10-day ISE/CBOE/PHLX put/call volume ratio has ascended to 0.47 -- above 68% of all other readings of the past 52 weeks. In simpler terms, option buyers are scooping up QCOM puts, relative to calls, at a quicker-than-usual pace.
In the front-month series, speculators have taken a shine to the October 67.50 put, which is slightly in the money, with QCOM docked at $66.63. Over the past two weeks, more than 5,000 contracts have been added at this strike, though peak put open interest resides at the October 65 strike, home to almost 26,700 puts outstanding.
Elsewhere on the Street, short sellers are also growing increasingly skeptical of QCOM, with short interest jumping 26.9% during the last two reporting periods. On the flip side, analysts remain devoted to the bullish bandwagon. QCOM has earned 19 "buy" or better ratings, compared to five "holds" and not a single "sell" or worse suggestion.
On the charts, QCOM has tacked on 7.8% in 2013, and notched a 13-year high of $70.37 just last month. The stock has pulled back with the broader equities market this week, and is in danger of ending beneath its 10-week moving average for the first time since mid-July.
Texas Instruments Incorporated (NASDAQ:TXN)
Finally, during the past week on the CBOE, TXN has seen nearly 4,500 puts change hands, compared to just 131 calls. The resulting 5-day put/call volume ratio of 34.28 is among the top 10 on the exchange.
Expanding that to include data from the ISE and PHLX, and broadening the scope to two weeks, TXN sports a 10-day put/call volume ratio of 13.41, indicating that traders have purchased more than 13 puts for every call during this time frame. Even more telling, this ratio sits just 2 percentage points from a 12-month peak, suggesting option buyers are picking up TXN puts over calls at a near-annual-high clip.
As a result, the security's SOIR has ascended to 1.92, implying that puts almost double calls among near-term options. This ratio is just 14 percentage points from its own 12-month peak, underscoring the healthier-than-usual appetite for short-term puts relative to calls.
The out-of-the-money October 37 strike is home to peak put open interest in the front-month series, with more than 6,350 contracts outstanding. The closer-to-the-money October 38 put has been gaining traction, though, with more than 4,000 contracts added during the past two weeks. In similar fashion, the November 38 put has seen open interest grow by about 2,400 contracts over 10 sessions.
Considering TXN tagged a 12-year acme of $40.94 less than a month ago, and is now flirting with $40.08, it's possible the traders bought puts to hedge their TXN shares. By purchasing protective puts, the speculators lock in an acceptable price (the strike) at which to sell their TXN shares, should the stock take a turn for the worse in the short term. Their primary goal remains for the stock to extend its quest for new highs -- and possibly enjoy an earnings-induced upswing after the company reports on Oct. 21.
Meanwhile, despite the equity's impressive technical performance, just seven out of 28 analysts consider TXN worthy of a "buy" or better rating. Plus, short interest represents nearly a week's worth of pent-up buying demand, at the stock's average daily trading volume. Should the security once again enjoy earnings-related tailwinds -- the shares gained 3.3%, on average, the day after TXN's last two turns in the earnings spotlight -- a round of upgrades or a short-squeeze situation could add contrarian fuel to the stock's fire.
9 Levels to Watch for Apple Inc.
Featured Partners: AOL DailyFinance
© 2013 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242
Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: email@example.com
All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.
Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.